Friday, August 2, 2013

The media is making a great deal of July's non-farm payroll numbers in the US. The situation is quite simple actually - we are seeing the same level of growth we've seen in the past couple of years - no more, no less. Part of the issue here is the noise related to seasonal adjustments. As the US job market composition changes, so do some seasonal patterns - which is what the Labor Department is having a bit of trouble with.

Analysts in the highly seasonal energy industry often don't bother with seasonal adjustments. They simply compare each data point to the range for the same month during previous years. Focusing just on the private sector payrolls without the seasonal adjustments, here is what we get. No surprises, no seasonal adjustment magic.

Source: U.S. Bureau of Labor Statistics

And this is what the July payroll number looks like through time. The post-2009 growth is nearly linear, adding on average 2.25 million private jobs per year.

Source: U.S. Bureau of Labor Statistics

Similarly, some are pointing out that there is a higher than expected number of temporary jobs in the July report. Once again, it's the issue of seasonal adjustments. The percentage of temporary workers is actually right where it has been for the past several years in July - just over 20%.

Source: U.S. Bureau of Labor Statistics (NSA)

While this employment situation report surprised many analysts, it's actually quite ordinary once you remove the seasonal adjustment magic. Employment growth is following the same slow trend it has for some time.